One day after the cow returns, washes his face again: How to survive in the crypto market with skyrocketing and plummeting?

Original text: Jordi Alexander , founder of Selini Capital

Compiled by: Yuliya, PANews

After the market's largest single-day market value growth in history, it ushered in the second largest single-day decline in history just one day after the market experienced the largest single-day decline. This extreme volatility caught market participants off guard.

Many traders suffer severe losses in this environment. On the one hand, due to panic or technical structure breaking signals, they cut their losses at the bottom of the market; on the other hand, they blindly chased the rise at the top due to the brief rebound of the market or the positive news, and eventually encountered a second market collapse.

In the crazy bull market in November 2024, the market expanded rapidly overall, and most investors tended to go long, so it was relatively easy to make money. But in the current extremely volatile market, it is difficult to make profits in the long term based on luck alone. Only investors with highly specialized trading strategies can survive in extreme environments and possibly make profits from them. They usually adopt the following strategies.

Cash is king, liquidity is preferred

In highly volatile markets, it is crucial to hold adequate cash and even a portion of the expected earnings (EV) is sacrificed to ensure liquidity.

Taking investment management company Jane Street as an example, the institution invested long-term funds to purchase deeply inflated put options. Even if it faced continuous losses in the short term, when the market collapsed, its abundant liquidity allowed it to acquire assets that were wrongly killed at a low price. Compared with traditional financial markets, the crypto market has a higher leverage popularity and more serious liquidity mismatch, so this strategy is particularly important.

Some top traders tend to gradually reduce positions in the "shoulder" area when the market is rising sharply, rather than waiting for the extreme peak in the "head" area. Although some of the upside potential may be missed in the short term, by recovering funds and improving the ability to re-enter the market in more attractive price ranges, this strategy has more advantages in the long run.

Focus on price, not time

Top traders are not usually limited to trading time frames, but define trading ranges based on prices. For example, in the last bull market, trader High Stakes Capital posted eight-digit profit screenshots of FTX account, and his position was only built two months ago. This shows that in extreme market conditions, time is not a key variable, and the core lies in the clear trading range setting.

The transaction logic should be based on the following two points:

1. Determine the buying price with obvious value support to avoid affecting decision-making due to short-term fluctuations.

2. Set a clear risk-return ratio and target exit price , and execute the transaction decisively when the market hits the target.

Then stay patient, whether it's hours or weeks, and execute the transaction as long as the price hits the target. At the same time, you should constantly adjust your "ideal entry price" and "ideal exit price" as market changes.

If you are too focused on the time dimension, such as "only day trading" or "only long weekly holding positions", then trading performance is destined to be limited. The core thinking model of top traders is: " Buy low and sell high". As for the holding time, it is determined by market volatility.

Execute calmly and strictly follow the trading plan

In extreme market environments, the scale of holdings must match your own financial strength. If the position is too large and the market continues to decline, traders are prone to psychological imbalance due to floating losses, thus deviating from the original plan.

The current market still has a large number of positive factors and abundant liquidity, so it is difficult to enter a sustained multi-year bear market. This macro judgment has enabled some investors to remain confident when the market falls. At the same time, they do not expect the full outbreak of the "altcoin season", so they will gradually cash in on profits as the market rises and patiently wait for the next round of more attractive entry opportunities.

In market decisions, some investors adopt a psychological strategy when deciding whether to sell or not is to ask themselves: Is the current price likely to fall back again? If the answer is yes, it means that the point is not the best entry opportunity, and it is suitable to stay waiting and see and wait for a better risk-return ratio window to appear.

Market Practical Battle: Trading Strategies in Fluctuating Markets

Take Bitcoin as an example. When the price fell from $100,000 to $90,000, some traders began to build positions in batches. Slowly buy in the $90,000 area, and when the position reaches the expected scale at $82,000, and is willing to hold it for a long time.

However, the market further fell to US$78,000-79,000, with short-term floating losses widening. However, from the perspective of risk-return ratio, the investment value of this price level has been enhanced, so some investors choose to free up additional funds to increase their positions rather than passively stop losses. The premise is based on long-term market structure analysis and do not believe that the market will enter a long-term bear market.

The ultimate average holding cost will drop to US$83,000-84,000. If the market recovers to US$100,000, it will produce a relatively ideal return.

As the market rebounded, the bottom position of $78,000 was partially taken profit at $85,000 to ensure that there is still funds in hand to deal with the possible secondary pullback. At the same time, most core positions are still held as planned.

If the market does not give a second pullback opportunity and rises directly, all take-profit will be completed in the range of 87,000 to 93,000 US dollars, waiting for the next ideal entry price. If the market breaks through $95,000 but does not pull back to $88,000, the expected entry point will be adjusted to $90,000. When the market falls back to US$90,000, buy again in batches and adjust the strategy according to the market trend.